January 24, 2015
Investing with life insurance products (cash value life insurance and annuities) is very expensive. Why? Alternative?
Investing with life insurance products (cash value life insurance and annuities) is very expensive. Why? Alternative?
The reason that it is so expensive to do that is due to the commisions and fees charged by the agents. They make their living off of selling those policies to you. They are a poor life insurance policy and a poor investment. You are much better off getting life insurance and investing separately. Your best course of action if you need life insurance is to go to term4you.com and get a term life policy. They are much cheeper then the whole life option. If you want to invest then go to Vanguard and buy index funds. You can get the best of both worlds this way by keeping those two worlds seperate.
Investing in life insurance and annuities is bad because it is expensive, undiversified, and it ties up your money. Instead of investing in those you should buy term life insurance and take the money your saving and invest it in mutual index funds. That way you have control over your investment instead of someone else. Temp life insurance is much cheaper and by the time the term is up you shouldn’t have bay dependents who would need life insurance and you should of made more money off of your mutual index funds.
Life insurance products that contain an investment options are a poor idea. This combination puts together 2 things that should not be put together as there is no value for the purchaser of the policy. It is more expensive for the insurance companies to combine these two products and sell to the buyer than if the buyer were to purchase these two separately. One reason why this is a bad value for the purchaser is that the salesmen require large commissions to these products and the buyer pays the salesman’s commission. Usually companies combine market segments to create Economies of Scope, which is where a one company can produce a multiple products cheaper than multiple companies can produce them individually. This is also known as synergy. Unfortunately this does not occur in the cash life insurance and annuities product line. A person is better off to buy these products separately. For an investment, people can choose low cost index funds through Schwab or Vanguard. If insurance is even necessary, they can purchase a term policy that has no investment options from online retailers such as term4sale.com.
Great answers, gentlemen. Let’s review.
(1) Life insurance products are loaded with high fees to pay the high commissions to the salespeople.
(2) You ultimately pay those commissions with those guaranteed returns as they lock up your money for long periods of time.
(3) NEVER invest with life insurance products. If you need life insurance, go to a clearinghouse on the net and get term.
(4) When investing, stick with no-load index mutual funds that diversify you all over the world at a very low cost.
(5) Pass this information on to others so they know what you know. Investing in life insurance is only for the uninformed!